run-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37511

Sunrun Inc.

(Exact name of registrant as specified in its charter)


Delaware						26-2841711
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

225 Bush Street, Suite 1400

San Francisco, California 94104

(Address of principal executive offices and Zip Code)

(415) 580-6900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	RUN	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2021, the number of shares of the registrant’s common stock outstanding was 207,004,907.

Table of Contents


		Page

	Special Note Regarding Forward-Looking Statements	2
	Selected Risks Affecting our Business	4
Item 1.	Financial Statements (Unaudited)	6
	Consolidated Balance Sheets	6
	Consolidated Statements of Operations	8
	Consolidated Statements of Comprehensive Income (Loss)	9
	Consolidated Statements of Redeemable Noncontrolling Interests and Equity	10
	Consolidated Statements of Cash Flows	12
	Notes to Consolidated Financial Statements	14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	92
Item 5.	Other Information	92
Item 6.	Exhibits	92
	Signatures	94

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The discussion in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the potential effects of the COVID-19 pandemic on our business and operations, results of operations and financial position;

•the expected benefits and potential value created by the merger with Vivint Solar for our stockholders;

•the inherent risks, costs and uncertainties associated with integrating the businesses in the merger with Vivint Solar successfully and risks of not achieving all or any of the anticipated benefits of the merger with Vivint Solar, or the risk that the anticipated benefits of the acquisition may not be fully realized or take longer to realize than expected;

•the amount of any costs, fees, expenses, impairments and charges relating to the merger with Vivint Solar;

•the availability of rebates, tax credits and other financial incentives, and decreases to federal solar tax credits;

•determinations by the Internal Revenue Service of the fair market value of our solar energy systems;

•the retail price of utility-generated electricity or electricity from other energy sources;

•regulatory and policy development and changes;

•our ability to manage our supply chains and distribution channels and the impact of natural disasters and other events beyond our control, such as the COVID-19 pandemic;

•our industry’s, and specifically our, continued ability to manage costs (including, but not limited to, equipment costs) associated with solar service offerings;

•our strategic partnerships and expected benefits of such partnerships;

•our ability to realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and risk that the integration of these acquisitions may disrupt our business and management;

•the sufficiency of our cash, investment fund commitments and available borrowings to meet our anticipated cash needs;

•our need and ability to raise capital, refinance existing debt, and finance our operations and solar energy systems from new and existing investors;

•the potential impact of interest rates on our interest expense;

•our business plan and our ability to effectively manage our growth, including our rate of revenue growth;

•our ability to further penetrate existing markets, expand into new markets and our expectations regarding market growth (including, but not limited to, expected cancellation rates);

•our expectations concerning relationships with third parties, including the attraction, retention and continued existence of qualified solar partners;

•the impact of seasonality on our business;

•our investment in research and development and new product offerings;

•our ability to protect our intellectual property and customer data, as well as to maintain our brand;

•the willingness of and ability of our solar partners to fulfill their respective warranty and other contractual obligations;

•our ability to renew or replace expiring, cancelled or terminated Customer Agreements at favorable rates or on a long-term basis;

•the ability of our solar energy systems to operate or deliver energy for any reason, including if interconnection or transmission facilities on which we rely become unavailable;

•our expectations regarding certain performance objectives and the renewal rates and purchase value of our solar energy systems after expiration of our Customer Agreements;

•the calculation of certain of our key financial and operating metrics and accounting policies; and

•our ability to capitalize on the market opportunities created by the electrification of the U.S. economy with renewable energy.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. These risks and uncertainties may be amplified by the ongoing COVID-19 pandemic, which has caused significant economic uncertainty and negative impacts on capital and credit markets. The extent to which the COVID-19 pandemic impacts our business, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous factors, many of which are unpredictable, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the pandemic or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission (the “SEC”) as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

SELECTED RISKS AFFECTING OUR BUSINESS

Investing in our common stock involves numerous risks, including the risks described in “Part II, Item 1A. Risk Factors”, of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations and prospects.

Selected Risks Related to the Impacts of COVID-19

•The COVID-19 pandemic has had and could continue to have an adverse impact on our business, operations and the markets and communities in which we operate. Efforts to mitigate or contain the pandemic and the resulting weakened economic conditions may disrupt and adversely affect our business.

Selected Risks Related to the Solar Industry

•The solar energy industry is an emerging market which is constantly evolving and may not develop to the size or at the rate we expect.

•We have historically benefited from declining costs in our industry, and our business and financial results may be harmed not only as a result of any increases in costs associated with our solar service offerings but also any failure of these costs to continue to decline as we currently expect. If we do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired.

•We face competition from traditional energy companies as well as solar and other renewable energy companies.

Selected Risks Related to Our Operating Structure and Financing Activities

•We need to raise capital to finance the continued growth of our operations and solar service business. If capital is not available to us on acceptable terms, as and when needed, our business and prospects would be materially and adversely impacted. In addition, our business is affected by general economic conditions and related uncertainties affecting markets in which we operate. Volatility in current economic conditions could adversely impact our business, including our ability to raise financing.

•Rising interest rates would adversely impact our business.

•We expect to incur substantially more debt in the future, which could intensify the risks to our business.

Selected Risks Related to Regulation and Policy

•We rely on net metering and related policies to offer competitive pricing to customers in all of our current markets, and changes to such policies may significantly reduce demand for electricity from our solar service offerings.

•Electric utility statutes and regulations and changes to such statutes or regulations may present technical, regulatory and economic barriers to the purchase and use of our solar service offerings that may significantly reduce demand for such offerings.

•Regulations and policies related to rate design could deter potential customers from purchasing our solar service offerings, reduce the value of the electricity our systems produce, and reduce any savings that our customers could realize from our solar service offerings.

Selected Risks Related to Our Business Operations

•Our growth depends in part on the success of our relationships with third parties, including our solar partners.

•We and our solar partners depend on a limited number of suppliers of solar panels, batteries, and other system components to adequately meet anticipated demand for our solar service offerings. Any shortage, delay or component price change from these suppliers, or the acquisition of any of these suppliers by a competitor, could result in sales and installation delays, cancellations and loss of market share

•We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt our business and our management.

•A failure to hire and retain a sufficient number of employees and service providers in key functions would constrain our growth and our ability to timely complete customers' Projects and successfully manage customer accounts.

•Regulations may limit the type of electricians qualified to install and service our solar and battery systems in California, which may result in workforce shortages, operational delays, and increased costs.

•Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of our common stock.

•Our actual financial results may differ materially from any guidance we may publish from time to time.

Selected Risks Related to Taxes and Accounting

•Our ability to provide our solar service offerings to customers on an economically viable basis depends in part on our ability to finance these systems with fund investors who seek particular tax and other benefits.

•If the Internal Revenue Service makes determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our fund investors, and our business, financial condition and prospects may be materially and adversely affected.

•Our business currently depends on the availability of utility rebates, tax credits and other benefits, tax exemptions and other financial incentives. The expiration, elimination or reduction of these benefits, rebates, or incentives could adversely impact our business.

If we are unable to adequately address these and other risks we face, our business may be harmed.

Sunrun Inc.

Consolidated Balance Sheets

(In Thousands, Except Share Par Values)

(Unaudited)


	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash	$	717,593	$	519,965
Restricted cash	223,380		188,095
Accounts receivable (net of allowances for credit losses of $11,349 and $4,861 as of September 30, 2021 and December 31, 2020, respectively)	177,826		95,141

Inventories	444,519		283,045
Prepaid expenses and other current assets	31,342		51,483
Total current assets	1,594,660		1,137,729
Restricted cash	148		148
Solar energy systems, net	9,126,451		8,202,788
Property and equipment, net	60,659		62,182
Intangible assets, net	14,233		18,262
Goodwill	4,280,169		4,280,169
Other assets	1,013,349		681,665
Total assets (1)	$	16,089,669	$	14,382,943
Liabilities and total equity
Current liabilities:
Accounts payable	$	347,068	$	207,441
Distributions payable to noncontrolling interests and redeemable noncontrolling interests	33,350		28,627
Accrued expenses and other liabilities	364,481		325,614
Deferred revenue, current portion	109,162		108,452
Deferred grants, current portion	8,302		8,251
Finance lease obligations, current portion	11,163		11,037
Line of credit	209,284		—
Non-recourse debt, current portion	193,834		195,036
Pass-through financing obligation, current portion	6,982		16,898
Total current liabilities	1,283,626		901,356
Deferred revenue, net of current portion	739,356		690,824
Deferred grants, net of current portion	205,684		213,269
Finance lease obligations, net of current portion	12,409		12,929
Line of credit	—		230,660
Convertible senior notes	390,049		—
Non-recourse debt, net of current portion	5,343,639		4,370,449
Pass-through financing obligation, net of current portion	316,905		323,496
Other liabilities	188,784		268,684
Deferred tax liabilities	70,807		81,905
Total liabilities (1)	8,551,259		7,093,572
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests	596,901		560,461
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 200,000 shares as of September 30, 2021 and December 31, 2020; no shares issued and outstanding as of September 30, 2021 and December 31, 2020	—		—
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of September 30, 2021 and December 31, 2020; issued and outstanding, 206,887 and 201,406 shares as of September 30, 2021 and December 31, 2020, respectively	21		20
Additional paid-in capital	6,264,830		6,107,802
Accumulated other comprehensive loss	(77,681)		(106,755)
Retained earnings	35,940		76,844
Total stockholders’ equity	6,223,110		6,077,911
Noncontrolling interests	718,399		650,999
Total equity	6,941,509		6,728,910
Total liabilities, redeemable noncontrolling interests and total equity	$	16,089,669	$	14,382,943

1)The Company’s consolidated assets as of September 30, 2021 and December 31, 2020 include $7,883,232 and $7,190,866, respectively, in assets of variable interest entities (“VIEs”) that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, as of September 30, 2021 and December 31, 2020 of $7,252,540 and $6,748,127, respectively; cash as of September 30, 2021 and December 31, 2020 of $311,416 and $219,502, respectively; restricted cash as of September 30, 2021 and December 31, 2020 of $48,293 and $34,559, respectively; accounts receivable, net as of September 30, 2021 and December 31, 2020 of $58,102 and $35,152, respectively; inventories as of September 30, 2021 and December 31, 2020 of $50,226 and 23,306, respectively; prepaid expenses and other current assets as of September 30, 2021 and December 31, 2020 of $2,607 and $2,629, respectively; and other assets as of September 30, 2021 and December 31, 2020 of $160,048 and $127,591, respectively. The Company’s consolidated liabilities as of September 30, 2021 and December 31, 2020 include $2,100,425 and $1,857,967, respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of September 30, 2021 and December 31, 2020 of $28,824 and $15,609, respectively; distributions payable to noncontrolling interests and redeemable noncontrolling interests as of September 30, 2021 and December 31, 2020 of $33,350 and $28,577, respectively; accrued expenses and other current liabilities as of September 30, 2021 and December 31, 2020 of $28,723 and $24,660, respectively; deferred revenue as of September 30, 2021 and December 31, 2020 of $508,942 and $538,067, respectively; deferred grants as of September 30, 2021 and December 31, 2020 of $25,944 and $26,898, respectively; non-recourse debt as of September 30, 2021 and December 31, 2020 of $1,449,165 and $1,192,411, respectively; and other liabilities as of September 30, 2021 and December 31, 2020 of $25,477 and $31,745, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

Sunrun Inc.

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue:
Customer agreements and incentives	$	231,869	$	114,485	$	625,939	$	319,704
Solar energy systems and product sales	206,896		95,275		548,786		282,081
Total revenue	438,765		209,760		1,174,725		601,785
Operating expenses:
Cost of customer agreements and incentives	174,457		77,350		512,073		239,049
Cost of solar energy systems and product sales	172,538		75,679		458,208		231,023
Sales and marketing	171,462		70,720		442,174		210,691
Research and development	5,602		5,205		16,624		14,222
General and administrative	51,290		41,829		199,836		111,659
Amortization of intangible assets	1,341		1,167		4,029		3,817
Total operating expenses	576,690		271,950		1,632,944		810,461
Loss from operations	(137,925)		(62,190)		(458,219)		(208,676)
Interest expense, net	(89,096)		(51,368)		(238,365)		(152,013)
Other (expenses) income, net	(4,332)		864		18,462		766
Loss before income taxes	(231,353)		(112,694)		(678,122)		(359,923)
Income tax benefit (expense)	9,980		(27,293)		(19,058)		(30,424)
Net loss	(241,333)		(85,401)		(659,064)		(329,499)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(265,462)		(122,848)		(618,160)		(325,425)
Net income (loss) attributable to common stockholders	$	24,129	$	37,447	$	(40,904)	$	(4,074)
Net income (loss) per share attributable to common stockholders
Basic	$	0.12	$	0.30	$	(0.20)	$	(0.03)
Diluted	$	0.11	$	0.28	$	(0.20)	$	(0.03)
Weighted average shares used to compute net income (loss) per share attributable to common stockholders
Basic	206,103		125,003		204,355		121,813
Diluted	213,016		134,548		204,355		121,813

The accompanying notes are an integral part of these consolidated financial statements.

Sunrun Inc.

Consolidated Statements of Comprehensive Loss

(In Thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) attributable to common stockholders	$	24,129	$	37,447	$	(40,904)	$	(4,074)
Unrealized (loss) gain on derivatives, net of income taxes	(968)		(335)		17,620		(75,510)
Adjustment for net loss on derivatives recognized into earnings, net of income taxes	4,731		4,579		11,454		5,243
Other comprehensive income (loss)	3,763		4,244		29,074		(70,267)
Comprehensive income (loss)	$	27,892	$	41,691	$	(11,830)	$	(74,341)

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Three Months Ended September 30, 2021 and 2020

(In Thousands)

(Unaudited)


	Three Months Ended September 30, 2021
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at June 30, 2021	$	599,313		205,374	$	21		$	6,226,069	$	(81,444)	$	11,811	$	6,156,457	$	736,336	$	6,892,793

Exercise of stock options	—			483	—			4,343		—		—		4,343		—		4,343
Issuance of restricted stock units	—			1,030	—			—		—		—		—		—		—

Stock-based compensation	—			—	—			41,980		—		—		41,980		—		41,980
Contributions from noncontrolling interests and redeemable noncontrolling interests	90,000			—	—			—		—		—		—		234,342		234,342
Distributions to noncontrolling interests and redeemable noncontrolling interests	(15,104)			—	—			—		—		—		—		(37,124)		(37,124)
Net loss	(58,453)			—	—			—		—		24,129		24,129		(207,009)		(182,880)

Acquisition of noncontrolling interests	(18,855)			—	—			(7,562)		—		—		(7,562)		(8,146)		(15,708)
Other comprehensive loss, net of taxes	—			—	—			—		3,763		—		3,763		—		3,763
Balance at September 30, 2021	$	596,901		206,887	$	21		$	6,264,830	$	(77,681)	$	35,940	$	6,223,110	$	718,399	$	6,941,509


	Three Months Ended September 30, 2020
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at June 30, 2020	$	450,682		122,307	$	12		$	806,702	$	(127,264)	$	208,717	$	888,167	$	353,338	$	1,241,505

Exercise of stock options	—			2,791	—			20,469		—		—		20,469		—		20,469
Issuance of restricted stock units, net of tax withholdings	—			379	1			—		—		—		1				1

Stock-based compensation	—			—	—			8,217		—		—		8,217				8,217
Contributions from noncontrolling interests and redeemable noncontrolling interests	151,906			—	—			—		—		—		—		85,000		85,000
Distributions to noncontrolling interests and redeemable noncontrolling interests	(10,082)			—	—			—		—		—		—		(12,940)		(12,940)
Net (loss) income	(84,445)			—	—			—		—		37,447		37,447		(38,403)		(956)


Shares issued in connection with a subscription agreement	—			2,075	—			75,000		—		—		75,000		—		75,000
Other comprehensive income, net of taxes	—			—	—			—		4,244		—		4,244		—		4,244
Balance at September 30, 2020	$	508,061		127,552	$	13		$	910,388	$	(123,020)	$	246,164	$	1,033,545	$	386,995	$	1,420,540

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Nine Months Ended September 30, 2021 and 2020

(In Thousands)

(Unaudited)


	Nine Months Ended September 30, 2021
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at December 31, 2020	$	560,461		201,406	$	20		$	6,107,802	$	(106,755)	$	76,844	$	6,077,911	$	650,999	$	6,728,910

Exercise of stock options	—			1,832	—			16,587		—		—		16,587		—		16,587
Issuance of restricted stock units	—			3,206	1			—		—		—		1		—		1
Shares issued in connection with the Employee Stock Purchase Plan	—			443	—			6,761		—		—		6,761		—		6,761
Stock-based compensation	—			—	—			168,970		—		—		168,970		—		168,970
Contributions from noncontrolling interests and redeemable noncontrolling interests	157,127			—	—			—		—		—		—		743,205		743,205
Distributions to noncontrolling interests and redeemable noncontrolling interests	(47,318)			—	—			—		—		—		—		(99,441)		(99,441)
Net income (loss)	(49,942)			—	—			—		—		(40,904)		(40,904)		(568,218)		(609,122)
Capped call transaction	—			—	—			(28,000)		—		—		(28,000)		—		(28,000)
Acquisition of noncontrolling interests	(23,427)			—	—			(7,290)		—		—		(7,290)		(8,146)		(15,436)
Other comprehensive income, net of taxes	—			—	—			—		29,074		—		29,074		—		29,074
Balance at September 30, 2021	$	596,901		206,887	$	21		$	6,264,830	$	(77,681)	$	35,940	$	6,223,110	$	718,399	$	6,941,509


	Nine Months Ended September 30, 2020
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at December 31,2019	$	306,565		118,451	$	12		$	766,006	$	(52,753)	$	251,466	$	964,731	$	366,701	$	1,331,432
Cumulative effect of adoption of new ASU (No. 2016-13)	—			—	—			—		—		(1,228)		(1,228)		—		(1,228)
Exercise of stock options	—			4,188	—			29,127		—		—		29,127		—		29,127
Issuance of restricted stock units, net of tax withholdings	—			2,509	1			(1,026)		—		—		(1,025)		—		(1,025)
Shares issued in connection with the Employee Stock Purchase Plan	—			329	—			3,737		—		—		3,737		—		3,737
Stock-based compensation	—			—	—			37,544		—		—		37,544		—		37,544
Contributions from noncontrolling interests and redeemable noncontrolling interests	471,858			—	—			—		—		—		—		139,997		139,997
Distributions to noncontrolling interests and redeemable noncontrolling interests	(25,179)			—	—			—		—		—		—		(39,461)		(39,461)
Net loss	(245,183)			—	—			—		—		(4,074)		(4,074)		(80,242)		(84,316)

Shares issued in connection with a subscription agreement	—			2,075	—			75,000		—		—		75,000		—		75,000
Other comprehensive loss, net of taxes	—			—	—			—		(70,267)		—		(70,267)		—		(70,267)
Balance at September 30, 2020	$	508,061		127,552	$	13		$	910,388	$	(123,020)	$	246,164	$	1,033,545	$	386,995	$	1,420,540

Sunrun Inc.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021		2020
Operating activities:
Net loss	$	(659,064)	$	(329,499)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, net of amortization of deferred grants	286,001		156,257
Deferred income taxes	(18,709)		(30,424)
Stock-based compensation expense	160,754		37,544


Interest on pass-through financing obligations	16,288		17,480
Reduction in pass-through financing obligations	(32,160)		(28,907)
Other noncash items	38,656		31,247
Changes in operating assets and liabilities:
Accounts receivable	(90,170)		2,727
Inventories	(161,474)		82,604
Prepaid and other assets	(273,948)		(37,958)
Accounts payable	120,412		(57,513)
Accrued expenses and other liabilities	27,953		(25,964)
Deferred revenue	49,632		15,647
Net cash used in operating activities	(535,829)		(166,759)
Investing activities:
Payments for the costs of solar energy systems	(1,186,330)		(619,012)
Purchase of equity method investment	—		(65,356)
Purchases of property and equipment, net	(11,640)		(2,384)
Net cash used in investing activities	(1,197,970)		(686,752)
Financing activities:
Proceeds from state tax credits, net of recapture	—		6,027
Proceeds from line of credit	526,980		126,950
Repayment of line of credit	(548,356)		(141,525)
Proceeds from issuance of convertible senior notes, net of capped call transaction	371,998		—
Proceeds from issuance of non-recourse debt	1,691,255		442,950
Repayment of non-recourse debt	(753,046)		(208,371)
Payment of debt fees	(42,757)		(8,353)
Proceeds from pass-through financing and other obligations	7,857		5,728
Early repayment of pass-through financing obligation	(18,050)		—
Payment of finance lease obligations	(9,243)		(7,763)
Contributions received from noncontrolling interests and redeemable noncontrolling interests	900,332		611,855
Distributions paid to noncontrolling interests and redeemable noncontrolling interests	(142,036)		(62,541)
Acquisition of noncontrolling interest	(41,572)		—
Net proceeds related to stock-based award activities	23,350		31,839

Proceeds from shares issued in connection with a subscription agreement	—		75,000
Net cash provided by financing activities	1,966,712		871,796

Net change in cash and restricted cash	232,913		18,285
Cash and restricted cash, beginning of period	708,208		363,229
Cash and restricted cash, end of period	$	941,121	$	381,514
Supplemental disclosures of cash flow information
Cash paid for interest	$	169,737	$	85,503
Cash paid for income taxes	$	—	$	—
Supplemental disclosures of noncash investing and financing activities
Purchases of solar energy systems and property and equipment included in accounts payable and accrued expenses	$	56,818	$	82,301
Right-of-use assets obtained in exchange for new finance lease liabilities	$	9,424	$	1,092
Portion of solar energy systems financed with seller financing, included within non-recourse debt	$	37,000	$	—

The accompanying notes are an integral part of these consolidated financial statements.

Sunrun Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Organization

Sunrun Inc. (“Sunrun” or the “Company”) was originally formed in 2007 as a California limited liability company and was converted into a Delaware corporation in 2008. The Company is engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States.

Sunrun acquires customers directly and through relationships with various solar and strategic partners (“Partners”). The Projects are constructed either by Sunrun or by Sunrun’s Partners and are owned by the Company. Sunrun’s customers enter into an agreement to utilize the solar energy system (“Customer Agreement”) which typically has an initial term of 20 or 25 years. Sunrun monitors, maintains and insures the Projects. The Company also sells solar energy systems and products, such as panels and racking and solar leads generated to customers.

The Company has formed various subsidiaries (“Funds”) to finance the development of Projects. These Funds, structured as limited liability companies, obtain financing from outside investors and purchase or lease Projects from Sunrun under master purchase or master lease agreements. The Company currently utilizes three legal structures in its investment Funds, which are referred to as: (i) pass-through financing obligations, (ii) partnership-flips and (iii) joint venture (“JV”) inverted leases.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2020.

The consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries, including Funds, in which the Company has a controlling financial interest. Beginning October 8, 2020, the Company's consolidated subsidiaries also included Vivint Solar, Inc. ("Vivint Solar"). The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity. However, a controlling financial interest may also exist in entities, such as variable interest entities (“VIEs”), through arrangements that do not involve controlling voting interests. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810 (“ASC 810”) Consolidation, the Company consolidates any VIE of which it is the primary beneficiary. The primary beneficiary, as defined in ASC 810, is the party that has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it continues to be the primary beneficiary. The consolidated financial statements reflect the assets and liabilities of VIEs that are consolidated. All intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company regularly makes estimates and assumptions, including, but not limited to, revenue recognition constraints that result in variable consideration, the discount rate used to adjust the promised amount of consideration for the effects of a significant financing component, the estimates that affect the collectability of accounts receivable, the valuation of inventories, the useful lives of solar energy systems, the useful lives of property and equipment, the valuation and useful lives of intangible assets, the effective interest rate used to amortize pass-through financing obligations, the discount rate uses for operating and financing leases, the fair value of contingent consideration, the fair value of assets acquired and liabilities assumed in a business combination, the valuation of stock-based compensation, the determination of valuation allowances associated with deferred tax assets, the fair value of debt instruments disclosed and the redemption value of redeemable noncontrolling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Actual results may differ from such estimates.

Segment Information

The Company has one operating segment with one business activity, providing solar energy services and products to customers. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who manages operations on a consolidated basis for purposes of allocating resources. When evaluating performance and allocating resources, the CODM reviews financial information presented on a consolidated basis.

Revenue from external customers (including, but not limited to homeowners) for each group of similar products and services is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Customer agreements	$	194,924	$	102,213	$	549,689	$	294,991
Incentives	36,945		12,272		76,250		24,713
Customer agreements and incentives	231,869		114,485		625,939		319,704

Solar energy systems	127,936		52,238		307,408		168,094
Products	78,960		43,037		241,378		113,987
Solar energy systems and product sales	206,896		95,275		548,786		282,081
Total revenue	$	438,765	$	209,760	$	1,174,725	$	601,785

Revenue from Customer Agreements includes payments by customers for the use of the system as well as utility and other rebates assigned by the customer to the Company in the Customer Agreement. Revenue from incentives includes revenue from the sale of commercial investment tax credits ("Commercial ITCs") and solar renewable energy credits (“SRECs”).

Cash and Restricted Cash

Restricted cash represents amounts related to obligations under certain financing transactions and future replacement of solar energy system components.

The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows. Cash and restricted cash consists of the following (in thousands):

Nine Months Ended September 30,